4 Retail Giants Poised to Beat Earnings Estimates This Month

The third-quarter 2019 earnings season is approaching its end. Despite several microeconomic, macroeconomic and geopolitical headwinds, third-quarter earnings reports indicate that near-term recessionary concerns are overblown. However, overall earnings are still expected to dip.

Better-Than-Expected Third-Quarter Earnings So Far    

As of Nov 6, 403 S&P 500 members reported third-quarter results. Total earnings for these index members decreased 1.7% from the same period last year while revenues increased 4%. Notably, 73% companies surpassed EPS estimates while 58.1% beat on revenues.

At present, total third-quarter earnings for the S&P 500 Index are expected to be down 2.4% from the prior-year period while revenues are expected to increase 4.1%. This indicates improvement from an earnings decline of 5% on 4.2% higher revenues, expected at the beginning of the reporting cycle. (Read More: The Evolving Earnings Picture)

Retail Sales in Q3

Overall retail sales in the third quarter of 2019 were mixed. In the first two months of the period, retail sales grew 0.8% and 0.6%, respectively. However, in September, retail sales declined 0.3%. In fact, a decline was noted for the first time since February.

Core retail sales in September (excluding automobiles, gasoline, building materials and food service) decreased 0.1% compared with a gain of 0.2% in August. However, year over year, retail sales increased 4.1% in September.

Meanwhile, U.S. consumer spending remained firm and is driving the country's GDP. In the third quarter of 2019, the U.S. economy grew 1.9%, surpassing the consensus estimate of 1.6%, primarily buoyed by a 2.9% increase in consumer spending. Household spending rose a seasonally adjusted 0.2% in September from August.

4 Retail Giants Set to Beat Earnings Estimates This Month

Below are four stocks set to beat earnings estimates this month. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. Each of our picks carries a Zacks Rank # 2 and has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank stocks here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The chart below shows price performance of our four picks in the past three months.

 

Walmart Inc. WMT is engaged in the retail and wholesale operations in various formats worldwide. It operates through three segments: Walmart U.S., Walmart International, and Sam's Club. The company has an Earnings ESP of +0.83% for the third quarter of fiscal 2020 (ended October 2019).

Walmart has an expected earnings growth rate of 0.9% and 0.2% for the current quarter and year, respectively. The company delivered positive earnings surprise in the last four quarters, with an average beat of 6.7%. Target is expected to release earnings results on Nov 14, before the opening bell.

Lowe's Companies Inc. LOW operates as a home improvement retailer in the United States, Canada and Mexico. The company offers a line of products for construction, maintenance, repair, remodeling and decorating. The company has an Earnings ESP of +1.62% for the third quarter of fiscal 2019 (ended October 2019).

Lowe's has an expected earnings growth rate of 28.9% and 10.3% for the current quarter and year, respectively. The company delivered positive earnings surprise in three out of the last four quarters, with an average beat of 1.6%. Lowe's is expected to release earnings results on Nov 20, before the opening bell.

Ross Stores Inc. ROST operates off-price retail apparel and home fashion stores under the Ross Dress for Less and dd's DISCOUNTS brands. Its stores primarily offer apparel, accessories, footwear, and home fashions. The company has an Earnings ESP of +4.03% for the third quarter of fiscal 2019 (ended October 2019).

Ross Stores has an expected earnings growth rate of 6.6% and 5.6% for the current quarter and year, respectively. The company delivered positive earnings surprise in the last four quarters, with an average beat of 2.5%. Ross Stores is expected to release earnings results on Nov 21, after the closing bell.

Target Corp. TGT operates as a general merchandise retailer in the United States. It provides an array of goods ranging from household essentials and electronics to toys and apparel for men, women and kids. The company has an Earnings ESP of +1.95% for the third quarter of fiscal 2019 (ended October 2019).

Target has an expected earnings growth rate of 8.3% and 14.3% for the current quarter and year, respectively. The Zacks Consensus Estimate for the current quarter and year improved 0.2%  and 0.9%, respectively, over the last 30 days.

The company delivered positive earnings surprise in two out of the last four quarters, with an average beat of 4.6%. Target is expected to release earnings results on Nov 22, before the opening bell.

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